E-levy: reduce fee to encourage digital payment

Stakeholders in the digital payment industry have advised the government to institute measures including the reduction of the E-levy charges to encourage digital payment in the country. During a Mobile Money forum organized by MTN Ghana, stakeholders offered suggestions on how to drive the digital payment ecosystem forward.

Addressing the forum on the theme, “Addressing Barriers to Digital Payments in Ghana,” Eric Kortey, General Manager of Cellulant Ghana Limited said there were just two options when it comes to digital payment; maintain a high transaction cost and get fewer transactions or offer less cost and get more transactions.

According to Eric Kortey, “This payment system provides such a volume-based business — you either keep the cost high and get less or you reduce it and get more”. He said since the country wants to “increase digital adoption, reducing E-levy charges would help address such barriers”.

“Although the country has made significant gains in creating access to digital financial services and smartphone penetration, a good proportion of the population are unable to access and participate in what is available,” Eric Kortey noted.

Background of Mobile Money and E-levy in Ghana

Mobile Money usage in Ghana has been on the rise since its inception in the country over a decade ago. The major players in the industry have been the telecommunication companies, led by MTN, with Vodafone and AirtelTigo (now AT) also commanding a reasonable share of the market. Integration with the traditional banking system that enables bank-to-wallet and wallet-to-bank transactions in recent years boosted the industry.

According to data from the Bank of Ghana, “Mobile money volume of transactions increased to 4.25 billion in 2021, representing a 47.1 per cent growth, compared to 2020. Similarly, the total value of transactions increased to GH¢ 978.32 billion in 2021, from GH¢ 571.80 billion in 2020.” The industry is expected to experience tremendous growth in the ensuing years.

A report by the IMARC Group said “The Ghana mobile money market size reached US$ 121.8 Billion in 2022,” and is projected to “reach US$ 590.7 Billion by 2028, exhibiting a growth rate (CAGR) of 29.6% during 2023-2028.”

However, the mobile money industry has not been without its downsides or challenges. The biggest drawback to the adoption of digital payment which is led by mobile money in Ghana has been the introduction of the E-Levy by the government in 2022. A report by GSMA for the nine months following the introduction of the tax saw a significant contraction in both the volume and value of transactions that attracted the tax.

According to GSMA, “In May 2022, the number of transactions below 100 GHS reduced by 19%, those between 100 and 200 GHS contracted by 28% and the reduction was 48% for transactions above 200 GHS. Moreover, the effect has been persistent, with a contraction in volumes of over 20% still after 9 months, compared to pre-tax levels. Similarly, transaction values and mobile money revenues have fallen by up to 35% year-on-year, with revenues still remaining 20% lower than pre-tax level after 9 months.

“Meanwhile, cash-out transactions (which are exempted from the levy) have increased both in value and in volumes following the introduction of the levy, with an increase year-on-year of 25% in volumes and 61% in value – signalling that consumers are returning to cash-based transactions.